California's plan to tax marijuana faces federal scrutiny

For months, proponents of California's Proposition 19 marijuana initiative hyped the local tax benefits of legalizing pot for recreational use.

Now, as voters in Sacramento and other cities consider companion ballot measures to impose taxes on the retail pot businesses that could open if Proposition 19 passes, the promised revenues may be in jeopardy.

As Californians vote Nov. 2 on Proposition 19, voters in at least 11 cities will decide 14 local marijuana measures. Suddenly the most controversial of those measures involve attempts by cities to levy a tax on recreational marijuana sales.

While Proposition 19 permits local governments to tax and regulate retail pot sales, U.S. Attorney General Eric Holder last week signaled that the Justice Department is unlikely to stand by and let that happen.

In a letter to former drug enforcement administrators, Holder raised the specter that recreational pot businesses that paid taxes on sales would be admitting to a federal crime.

Holder vowed to "vigorously enforce" federal drug laws and target "those individuals and organizations that possess, manufacture or distribute marijuana for recreational use, even if such activities are permitted under state law."

The ballot measures in Sacramento and several other cities also seek to impose or increase taxes on the nonprofit medical marijuana operations that are now legal in California.